Division of Interest Transfers for Probate: Always Begin with the Documents
Changes to a division of interest (DOI) due to the passing of an owner appear deceivingly straight-forward. The three types of estate distributions handled by an analyst are (1) probate of a will, (2) court administration of an intestate estate, and (3) intestate using the state’s laws of descent and distribution. Each of these types are loaded with potential pitfalls for the analyst in determining how to change the DOI in accordance with them.
The probate of a will can involve many documents, only some of which are necessary for determining how to change the DOI. But which ones? That depends in part on the state in which the probate is being done. Probate of a will must be done in the state of the decedent’s last residence, which might not be the state where the producing property is located. If the property is in Texas, but the will is probated in another state, the analyst should require that a court exemplified copy of the probate documents be filed into a Texas county, preferably where the Company’s producing well is located. Texas did not adopt the universal probate code into its statutes as most of other oil and gas producing states did, so Texas does not require probate of a foreign (out-of-state) will in order to recognize it in title transfers.
In Texas, the basic probate documents that the analyst should have before changing the DOI are the will, the court order admitting the will to probate, letters testamentary or letters of administration, and order admitting final accounting by the executor/administrator (unless the will specifically states one is not required).
An executor’s deed transferring real property from the estate to the devisees is always nice, but not always done as part of the probate. These are only the basic documents, and too often an estate probate goes beyond basic.
The second type of estate distribution is known as administration of an estate. No will is filed for probate, either because the statute of limitations has expired for filing the will for probate, or the owner died intestate. Typically, but not always, an analyst will see an administration of an estate when the value of the estate being distributes exceeds the legal limit for using the state’s laws of descent and distribution independent of a court. The petition for administration essentially asks the court to issue the equivalent of an affidavit of heirship (discussed below), after reviewing all evidence submitted under penalty of perjury.
The basic documents that an analyst should receive for an administration of an estate are letters of administration, order determining heirs under Texas laws of descent and distribution, and in some situations, the court-approved administrator’s deed(s) from the intestate estate created by the court, to the heirs as directed by the court order. The analyst should refer to company policy requiring which documents be filed of record in every county where the company owns in wells in which the decedent held an interest, before changing the DOI.
The third type of estate distribution is the affidavit of heirship, a controversial document in the industry. It usually is a pre-printed form, to be completed in handwriting by someone with personal knowledge of the facts stated in it. The forms vary among states (due in part by adoption/non-adoption of the universal probate code), so the analyst must make certain the form used is appropriate for the state where the property is located, not the state of the decedent’s last address, if the two are different.
The controversy surrounding an affidavit of heirship (AOH) is whether or not it offers an adequate level of protection from financial liability for the company. For this reason, almost none of the majors accept an AOH for purposes of changing a DOI. Instead, they require an administration of the intestate estate. Many lawyers have referred to an AOH as “an affidavit of lies,” with good reason. It is not uncommon for an analyst to receive more than one AOH for a deceased owner, from different heirs, and none of the affidavits contain the same information! To avoid this, some of the large independent oil companies will accept only an AOH drafted and filed into the public records by an attorney licensed to practice in the state where the property is located.
Next week’s blog will be “Texas Horizontal Well Plat: Important Types and Plat Components.”